Prime Minister Benjamin Netanyahu has devoted a great deal of effort to moving the Iranian nuclear program to the top of the international agenda. His emphasis on Tehran's threat to destroy the "Zionist entity" has contributed to increased pressure on Iran by the United States and Europe and the tightening of economic sanctions against it.

At the same time, the Netanyahu government is goading the international community. Instead of promoting negotiations for a two-state solution, it is ignoring the international consensus, international law and its own commitments to the American government. Instead of isolating Iran and its allies by strengthening pragmatic elements in the region, it is playing into the hands of those who reject peace.

The Finance Ministry's request to allocate NIS 61 million to settlements over the Green Line, which the Knesset Finance Committee approved on Tuesday, is not only an economic decision. The state budget, like its planning and construction policy and support for the outposts, is key to implementing the government's settlement policy and perpetuating the occupation.

By channeling special funds to the settlements, which already enjoy generous benefits - even as outlying areas of the country within the Green Line are in desperate need of assistance - the government has revealed it ideological, political and social priorities.

To get around various oversight mechanisms, the government channels funding for developing the settlements to the World Zionist Organization's settlement department. A report on the outposts that Ariel Sharon's government adopted in 2005 said the heads of this department helped establish the outposts without approval from the relevant government authorities. Although the report recommended restricting the settlement department's work beyond the Green Line and revoking land allocations that were used to establish outposts, the department continues to serve as the government's long arm in the territories.

A government that warns of a "second Holocaust" must stand before both its own citizens and the international community with clean hands. In developing the settlements while dragging its feet over diplomatic negotiations, Israel is slapping its friends in the face. Deepening the occupation is a self-destruct mechanism for a Jewish and democratic Israel.